Japanese Stocks Decline on Earnings Amid Global Slowdown

Oct. 24 (Bloomberg) -- Japanese shares fell, with the
Nikkei 225 Stock Average halting its longest winning streak
since July 2011, on concern the global economic slowdown is
crimping earnings and as commodities erased this year’s gains.

Kawasaki Heavy Industries Ltd. sank 5.7 percent after the
gas-turbine maker said operating profit missed its forecast as
sales fell in China and Europe. Inpex Corp., Japan’s top oil
explorer by market value, slid 2.1 percent after crude prices
fell to near a three-month low. Sharp Co. jumped 6.4 percent on
a report the electronics maker plans to sell 10 million
smartphones in the Chinese market.

The Nikkei 225 fell 0.7 percent to 8,954.30 at the 3 p.m.
close in Tokyo, declining for the first time in eight days.
Volume was 6.3 percent above the 30-day average. The Topix Index
slid 0.8 percent to 743.27, with almost two shares declining for
each that gained. Stocks pared losses after a survey from HSBC
Holdings Plc and Markit Economics showed manufacturing in China
may have contracted at a slower pace.

“More Japanese companies are likely to cut earnings
forecasts, dragged down by overseas demand as the U.S. and
Chinese economies slow,” said Tomomi Yamashita, a senior fund
manager at Shinkin Asset Management Co. in Tokyo, which oversees
$6.5 billion. “The decline in commodities may indicate
investors are no longer expecting stimulus policies and this is
weighing on stock markets.”

The Topix has risen 3.4 percent from Sept. 6 as the
European Central Bank, the U.S. Federal Reserve and the Bank of
Japan added stimulus to boost growth. Shares on the stock gauge
traded at 0.9 times book value, compared with 2.2 for the
Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600
Index.

China PMI

HSBC Holdings today released China’s purchasing managers’
index for October with a preliminary reading of 49.1, compared
with 47.9 for the month before. A number above 50 indicates
expansion. The survey may bolster prospects for the country’s
growth to rebound from a three-year low after exports and
production accelerated last month.

“Some investors are thinking the China’s PMI hit the
bottom, fueling confidence about the economy,” said Kenichi
Hirano, general manager and strategist at Tachibana Securities
Co. in Tokyo.

TDK Corp., an electronic-parts maker that gets more than 25
percent of its sales from China, slid 0.5 percent to 3,000 yen,
paring earlier losses of 2 percent. Fanuc Corp., a producer of
robotics for mainland factories, slid 1.2 percent to 13,040 yen
after falling as much as 2.7 percent.

Futures on the S&P 500 added 0.4 percent today. The gauge
declined 1.4 percent yesterday in New York, the lowest close
since Sept. 5, amid disappointing earnings at companies from 3M
Co. to DuPont Co. that missed expectations. The Dow Jones
Industrial Average booked its biggest decline since June.

‘Sentiments Swayed’

“Investor sentiments are being swayed” as major U.S.
companies cut earnings forecasts in addition to the global
economic slowdown, said Hiroichi Nishi, an equities manager at
SMBC Nikko Securities Inc. in Tokyo.

Kawasaki Heavy sank 5.7 percent to 166 yen. The company
said in a preliminary earnings statement that operating profit
fell to 10.3 billion yen ($129 million), missing its estimate by
49 percent, in the six months ended Sept. 30.

Jtekt Corp. tumbled 5.8 percent to 636 yen, after the
autoparts maker said net income declined to 4.5 billion yen for
the six months ended Sept. 30, 55 percent below its target. The
company cited reduced demand in Europe and foreign exchange
losses for the results.

Japan’s earnings season peaks next week, with 570 of the
1,672 companies listed on the Topix reporting results.

Commodities Drop

Commodities erased this year’s advance on speculation
demand for energy, industrial metals and some agricultural
products will slump because of the sluggish global economy. The
Standard & Poor’s GSCI Spot Index of 24 raw materials fell 1.4
percent yesterday in New York. Earlier, the gauge touched 635.1,
the lowest level since Aug. 3.

Energy companies declined after crude oil for December
delivery declined to $86.67 a barrel in New York yesterday, the
lowest settlement since July 12. Prices are down 12 percent this
year.

Sharp, Japan’s largest maker of liquid-crystal displays,
gained the most on the Nikkei 225, rising 6.4 percent to 167
yen. The Nikken Kogyo newspaper reported the company plans to
reach an annual sales target of 10 million units in two to three
years for a smartphone it’s developing for the Chinese market
with Hon Hai Precision Industry Co.

The Nikkei Stock Average Volatility Index fell 1 percent to
19.55, indicating that traders expect a swing of 5.6 percent on
the equity benchmark in the next 30 days.